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Exam 12: A Firms Sources of Financing

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Question 1

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Match the term with its definition. a.Balloon payment b.Business angels c.Chattel mortgage d.Crowdfunding e.Factoring f.Initial public offering g.Loan covenants h.Private placement i.Real estate mortgage j.Venture capitalist -A long-term loan with real property held as collateral.

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Question 2

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One factor that influences the choice between debt and equity is the:

A) returns anticipated from the enterprise.
B) risk of nationalisation.
C) degree of control the owners hope to retain.
D) state of the owners' estate plan.

E) B) and C)
F) A) and B)

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Question 3

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In the beginning, some entrepreneurs use ____________ as a source of financing.

Match the term with its definition. a.Balloon payment b.Business angels c.Chattel mortgage d.Crowdfunding e.Factoring f.Initial public offering g.Loan covenants h.Private placement i.Real estate mortgage j.Venture capitalist -Obtaining cash by selling accounts receivable to another business.

Match the term with its definition. a.Balloon payment b.Business angels c.Chattel mortgage d.Crowdfunding e.Factoring f.Initial public offering g.Loan covenants h.Private placement i.Real estate mortgage j.Venture capitalist -The process of raising very small investments from a large number of investors via the Internet.

Goodwill is considered an intangible asset and is highly valued when securing a loan.

One potential problem with acquiring funds from friends and relatives is that they might feel they have the right to interfere in the management of the business.

Instead of borrowing money from suppliers to purchase equipment, an increasing number of small businesses are:

Match the term with its definition. a.Asset-based loan b.Basis point c.Chattel mortgage d.Equipment loan e.JIBAR (Johannesburg Inter-Bank Agreed Rate) f.Line of credit g.Prime rate h.Purchase-order financing i.Term loan -The interest rate that South African-based banks charge other banks in South Africa.

If Ayanda finances her business with equity rather than debt, her net income could potentially be greater because:

A source of short-term funds for many small companies with inventories is:

If a company has a signed purchase order from a creditworthy customer and the gross profit margin on the order is anticipated to be 36 per cent, purchase-order financing is likely.

Venture capital companies:

Match the term with its definition. a.Asset-based loan b.Basis point c.Chattel mortgage d.Equipment loan e.JIBAR (Johannesburg Inter-Bank Agreed Rate) f.Line of credit g.Prime rate h.Purchase-order financing i.Term loan -Obtaining cash from a lender who, for a fee, advances the amount of the borrower's cost of goods sold for a specific customer order.

Ismail Alternative Power (Pty) Ltd., a company developing solar panels, has done considerable research and limited production during its two-year life.It is about ready for its IPO.At this stage of its life cycle, its ability to attract venture capital is:

Match the term with its definition. a.Balloon payment b.Business angels c.Chattel mortgage d.Crowdfunding e.Factoring f.Initial public offering g.Loan covenants h.Private placement i.Real estate mortgage j.Venture capitalist -A very large payment required about halfway through the term over which payments were calculated, repaying the loan balance in full.

Carla is a loan analyst at the bank.When Gary applied for a loan, Carla looked at his balance sheet for ________ assets to evaluate a possible loan for his company's financing.

Miracle Fund (Pty) Ltd., is a venture capitalist.In exchange for providing venture capital, Miracle Fund:

Match the term with its definition. a.Balloon payment b.Business angels c.Chattel mortgage d.Crowdfunding e.Factoring f.Initial public offering g.Loan covenants h.Private placement i.Real estate mortgage j.Venture capitalist -The issuance of shares to be traded in public financial markets.

Gina owns a clothing resale store in a low-income neighbourhood.Since opening, the store has hired five employees and is making a small profit.The store is the only business in her area and often sponsors fundraisers at the location.Since the store is in need of expansion capital, what type of funding should Gina do and why?